Effective capital structure decisions can lower the cost of capital, resulting in higher NPVs and more acceptable projects, thereby increasing the value of the firm.

Question

Quizplus · Accepted Answer

Effective capital structure decisions can optimize the balance between debt and equity financing, leading to a lower cost of capital, which in turn could result in higher NPVs of projects and increase the overall value of the firm. Therefore, the statement is true.

Effective Capital Structure Decisions Can Lower the Cost of Capital